Innovation Doesn’t Run on Calls for Projects
On “The Entrepreneurial State” by Mariana Mazzucato
By Nicolas Colin (Co-Founder & Director) | The Family
Industrial policy doesn’t have a sterling reputation. It has oftentimes been hijacked to sustain businesses that are doomed to fail. Most of all, it has been discredited by years of neoliberalism. For followers of Friedrich Hayek (1899–1992) and Milton Friedman (1912–2006), state intervention in the economy always destroys value. At most, it should supply favorable conditions for healthy competition among companies.
For several years, Professor Mariana Mazzucato of University College London has been battling against this reductive vision of the role of the state. In her best-selling book The Entrepreneurial State: Debunking Public vs. Private Sector Myths (Anthem Press, 2013), she shows how the state has always played a key role in the major waves of innovation. One of her key examples is the iPhone, whose components mainly come from initiatives undertaken by the US government, notably for military purposes.
Many in France are quick to take this as a validation of our old interventionist traditions. But in reality, there are very few similarities between Mazzucato’s vision of innovation and our national approach in France.
As seen in the Villani report on artificial intelligence, the French approach is to go all in with technology, running it through the administrative mechanisms of research institutes, calls for projects and industrial clusters. For Prof. Mazzucato, however, the state is at its best not when it focuses on a particular technology or gets lost in bureaucracy, but when it provides a new direction for innovation. And the best way to impose this direction is by defining “missions” that focus the attention of innovators (from the public and private sectors) on “problems to be solved”.
Why is this important? First, because solving a problem serves as a strategic imperative able to align players emerging from various sectors, all motivated by their own divergent interests. Innovation always bumps up against resistance. But if the goal is succeeding in a mission, it is easier for innovators to overcome this resistance and for the state to adjust the rules, even when faced with strongly entrenched interests.
Next, it’s because a mission allows for the creation and shaping of a market rather than simply the correction of market failures. Today, companies hide behind financial numbers and short-term indicators because the state fails to provide a mission. But if the market launches an assault on a problem to solve, then technology will find applications, competition will be synonymous with emulation, and flexibility will give way to disruptive innovation and large-scale job creation.
China can be seen implementing this vision. Seen from afar, one might think that it is the laissez-faire empire. But in reality, its markets are shaped to serve certain missions engraved in stone by the five-year plans of the Chinese Communist Party, such as the fight against climate change and the creation of new trade routes extending toward Africa and Europe.
Another example is Silicon Valley. This extraordinarily innovative ecosystem began to develop during the 1950s because Stanford University captured resources from the Department of Defense and put its laboratories to work in the service of a critical mission: winning the Cold War!
Industrial policy is not obsolete. But to revive it, our leaders must give all players, public and private, the goal of solving our most critical problems. France (and virtually every other nation) isn’t lacking in critical missions: improving the autonomy of an aging population, making healthcare accessible across the entire nation, facilitating housing access in large cities. It is time to put innovation to work.
(Originally published in Le Monde (in French), April 17, 2018.)
